Nexus

Can we Keep Both the Investor and Entrepreneur Happy?

Thursday, Aug. 1, 2013

Can we Keep Both the Investor and Entrepreneur Happy?

I met Emily Stone of Maya Mountain Cacao in Nicaragua early this year. She is bright, energetic, and laser focused on building prosperity for cacao farmers in Belize. We were both participating in a business 'boot camp' hosted by Agora Partners. I had an opportunity to speak to the 30+ Agora entrepreneurs about new forms of financing constructed to better fit their reality, in this case, the Demand Dividend concept we have been pioneering at Santa Clara University. Emily immediately grasped the advantages, as did several other entrepreneurs. A 'venture debt' vehicle that only pays out from a minority share of free cash flow, a sensible upside for investors but then extinguishes all claims and leaves company ownership in the hands of founders and employees. It also recognizes the agrarian nature of many developing economies and allows for variable payments, not installment debt with a revenue sweetener. She also liked the 'honeymoon' feature which, like equity, allows the investment to work for the enterprise first before seeking to be paid back. Emily became an advocate. Equity financing for Maya Mountain was not in the cards.

Two principals at Eleos Foundation, Andy Lower and Jim Villanueva, were also fans of the Demand Dividend concept and Jim found himself inspired by the great work Emily had already done. She was intent on expanding Maya Mountain to Guatemala with the same success recipe that was already working in Belize - working with cacao farmers, pruning and renovating dozens of farms, planting scores of new trees and working with the farming communities to improve yield, quality and reforestation of the mountains. Expansion financing came together quickly - based on the Demand Dividend structure.

Can we keep both the entrepreneur and investor happy? So far, yes! But come here their story and commentary on leading impactor sector participants as we discuss the role of structured exit financing for impact investing.